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Keep an Eye on Your OCI - Your Competitor Is!

A recent Government Accountability Office (GAO) protest decision is a warning to keep an eye out for potential organizational conflict of interest (OCI) issues because your competitor is doing so!

In January, the GAO sustained a protest filed by ASM Research, B-412187, involving a task order to build a cloud environment for mobile applications for the Veteran’s Administration (VA). The GAO found that the VA failed to adequately consider a potential organizational conflict of interest that would be created by the awardee’s development, hosting, and evaluation of applications under two separate task orders on the same contract.

ASM’s protest claimed that the awardee, Booz Allen, had an impaired objectivity OCI because a separate task order could require Booz Allen to monitor its own performance under the protested task order. ASM argued, and the GAO agreed, that in circumstances where Booz Allen was evaluating the failure of a third-party application under a separate task order, Booz Allen might have to determine whether the failure was caused by a fault in the application or by inadequate cloud capacity. GAO found that if Booz Allen were awarded the protested task order to develop the cloud environment, in those circumstances it would have an incentive, under its previously awarded task order, to shift responsibility for failure to the application developer.

Impaired Objectivity OCIs

The Federal Acquisition Regulation (FAR) at 9.504(a) requires that contracting officers avoid, neutralize, or mitigate potential significant OCIs. An impaired objectivity OCI arises where a contractor's ability to render impartial advice to the government would be undermined by its competing business interests.

Contractors should note that when a protest alleges a potential impaired objectivity situation, the GAO will sustain the protest if the facts indicate that the contractor would be implicitly reviewing its work while performing another contract (Nortel Gov't Solutions, Inc., B–299522.5) or would be engaged in conducting analyses and making recommendations concerning either its own or a competitor’s products or services (Ktech Corp., B–285330).

The ASM Research decision has three remarkable aspects that distinguish it from most GAO impaired objectivity decisions.

First, the VA contracting officer did conduct an OCI investigation. Many GAO decisions have set forth the principle that where an agency has given meaningful consideration as to whether a significant conflict of interest exists, the GAO will not substitute its judgment for the agency’s judgment, absent clear evidence that the agency’s conclusion is unreasonable. The GAO standard, in fact, requires the protester to identify “hard facts” that indicate the existence or potential existence of a conflict not reasonably considered by the contracting officer; a mere inference or suspicion of an actual or potential conflict is not enough. Here, the GAO concluded that the VA’s determination - that Booz Allen did not possess a significant, unmitigatable OCI – was unreasonable. The GAO reached this conclusion after studying the “lengthy” Performance Work Statement (PWS), and said that the VA determination was based upon flawed assumptions relating to the PWS. The GAO acknowledged that the identification of conflicts of interest is a fact-specific inquiry that requires the exercise of considerable discretion, yet still overturned the contracting officer’s decision.

Second, as noted above, the impaired objectivity OCI at issue in the protest was not an impairment of the awardee’s objectivity on the protested task order. Rather, GAO set aside the task order award because the award would create an OCI on anotherpreviously awarded task order.

Finally, the decision mentions in a footnote that, during the protest, the VA said that if Booz Allen has an impaired objectivity OCI, ASM “would have a comparable OCI” resulting from two other tasks orders held by ASM. In sustaining the protest, the GAO directed the VA to “meaningfully” evaluate whether there is an impaired objectivity OCI for Booz Allen and added that “the agency may want to investigate more fully whether ASM has a conflict.” GAO recommended that, in the event that the VA was to identify an OCI, the VA should consider requesting OCI mitigation plans or request a waiver.

Thus, the ASM Research decision goes one step beyond most GAO decisions – it sustains a protest where the “impaired” review would occur on another, previously awarded contract. TheASM Research decision also delves deeply into the reasonableness of the contracting officer’s OCI review and finds fault based on a detailed review of the awarded task order and the awardee’s related work.

These are important points because the impact of an impaired objectivity can extend beyond the entity submitting the proposal. For one, GAO has said that there is no reason to distinguish between a firm and its affiliates under FAR Subpart 9.5 (L-3 Servs., Inc., B-400134.11). Furthermore, the GAO has made it clear that impaired objectivity OCI situations are difficult to mitigate. (Nortel Gov't Solutions, Inc., B–299522.5 et al.). For example, an internal information firewall put in place during proposal preparation and after contract award, which is a common mitigation technique for unequal access to information OCIs, may be insufficient to mitigate the OCI in many impaired objectivity situations.

What Does this Mean for Contractors?

The GAO decision emphasizes the need for contractors to be alert to OCI scenarios where the contractor (or a competitor) is performing advisory services on another contract.

Contractors are well advised to have an OCI policy or procedure to help their employees identify potential OCI situations and how to conduct a review for such issues.

Here, the protest focused on an OCI situation that is common in industry today, given the broad scope of multiple award, indefinite-quantity/indefinite-delivery (IDIQ) contracts and the variety of task orders awarded under such IDIQ contracts. It is notable that the GAO suggests that the agency look into the possibility that both contractors involved in the protest (and – importantly – the only two contractors that submitted proposals) have an OCI issue.

The GAO recommends that the agency consider requesting OCI mitigation plans after the agency reconsiders, evaluates, and documents its OCI findings. This should be a standard practice for both agencies and contractors. Contractors should develop OCI mitigation plan expertise – or know where to obtain that expertise – in order to be prepared to timely address potential OCI scenarios.

The GAO also mentions that, in the event the agency identifies an OCI, it should consider requesting an OCI waiver. A waiver is an option available to the agency and may be particularly appropriate when there are a limited number of companies available to perform the needed work, or where, as is often the case for impaired objectivity OCI’s, the OCI does not create a competitive advantage in the procurement and the agency is willing to accept the “business risk” to the agency’s interests.